Senior Managers and Certification Regime (SMCR) – Implemented Dec 2019
The Senior Managers and Certification Regime (SMCR) replaced the previous UK approved Persons Regime (APR) in order to place more emphasis and focus on senior managers and their individual responsibility. SMCR aims to reduce harm to consumers and strengthen market integrity by making not only senior managers but also other key individuals more accountable for their conduct and competence.
- Accountability – roles and responsibility are clearly understood and staff are aware of determining accountability in a particular scenario
- Understanding – All staff understand the SMCR and how it affects them
- Sustainability – New employees understand and maintain the requirements of the SMCR
- Alignment – The SMCR lines up with business objectives
- Governance – Necessary actions are carried out appropriately at the right level and issues must be addressed, assessed and resolved accordingly
The SMCR was initially in force for banks, building societies, credit unions and PRA- designated investment firms (relevant Authorised Persons) since March 2016. This has now been extended to cover all FCA solo-regulated services firms since 9 December 2019. In 2023 it is likely to be extended into the Payment Services World, we estimate September 2023.
Under the SMCR FCA approval is required for the most senior people (‘senior managers’) performing key roles (‘senior management functions’) before starting their roles. Statements of responsibilities must be provided to every senior manager which outlines their responsibilities and what they are accountable for. Firms will be required to certify at least on an annual basis that individuals in “significant harm functions” (“Certified Persons”) are fit and proper.
How it can impact you?
The SMCR will affect the most senior management, with board members (or equivalent) and those who have significant influence, ability to cause significant harm or fall within the certification regime requirements. The FCA has made it clear that it sees the conduct rules regime as a critical change, designed to drive change in culture within firms.
Firms have a duty of responsibility to ensure that they implement these changes to avoid breaches. The SMCR will require firms to take the necessary steps to comply with the new regulation.
Firms will need to put time into designing systems and processes (including effective training) to implement all 3 aspects of the regime. An assessment will need to be conducted to consider whether it is necessary to make changes to your structure to align with SMCR. Furthermore, the SMCR will affect every aspect of dealing with people within the firm.
Who is affected?
Senior Managers approved by a regulator are affected the most. Responsibilities for running the firm must be allocated and made aware of to everyone in the firm. Managers must comply with “duty of responsibility” (FCA, PS18/16). Senior Management functions (SMF) will replace Significant Influence Functions.
Other non-executive directors
Non-executives who are not senior but must be fit and proper are also affected by the SMCR and therefore are expected to follow FCA’s requirements of the regime.
Certification Regime Staff
It is the firms responsibility to annually review the fitness and propriety of staff (no longer approved by regulator) however SMRC regime still applies.
Conduct Rules Staff
Enforceable conduct rules – at risk of regulatory fines.
Small number of employees not covered by conduct rules. (least affected by the SMRC regime).
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